(Reuters) -Hindustan Unilever (HUL) said on Monday that its board has approved the carving out of its ice-cream business into a separate listed entity.

The business, which includes brands such as Cornetto and Kwality Walls, accounts for 3% of the company's revenue.

HUL shareholders will receive shares in the new entity, the company said.

In October, HUL said it would separate the business but had not decided on the mode at the time.

It reported a smaller-than-expected profit for the second quarter due to higher costs and a slowdown in urban markets.

This follows its UK parent's decision in March to spin off its ice cream unit, which is home to the Magnum and Ben & Jerry's brands.

(Reporting by Ananta Agarwal in Bengaluru; Editing by Sonia Cheema)